Electric utilities, reactor designers and builders, and the federal government have badly underestimated the costs of new nuclear power plants over the past fifteen years. Although not all of the increases were readily predictable, particularly those caused by rapid general inflation, nuclear advocates failed to foresee most of the sixfold growth in real costs resulting from new reactors' greater complexity, scope, and regulatory surveillance.

This review recounts the methods used by nuclear power proponents to convince policymakers, the public, and themselves that new nuclear plants would be competitive with other energy sources, long after conclusive contrary evidence was available. It shows that the technique of "engineering estimation" relied upon by government and industry officials was singularly unsuited to predicting costs for an immature technology subject to changing regulation and overseen by mediocre management.

Industry conventions against expressing costs in real terms (constant dollars) further disguised the extent of cost escalation and impeded the application of empirical data in predicting future costs. Rigorous statistical examinations showing reactor cost growth far outstripping both overall inflation and coal-fired electricity costs were performed by outside analysts only. Failure to heed such findings has contributed to billions of dollars of excess investment in new nuclear projects, like Seabrook, being built by fifteen New England utilities.

The article concludes with suggestions for improving future estimation of nuclear power costs, and an appeal for institutionalizing countervailing economic assessments of large capital investment projects.



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